New County Appraisals: A Snapshot of That Day

The Real Estate Swami sees confusion on many faces of people wondering what to do regarding lower appraisals of their homes by their county auditor.  Homeowners are concerned that the lower value will hurt them if they put their house or condo up for sale in the months or years to come.   

Generally, appraisers are looking at a couple of things:  1) The condition of your house and 2) The sales' price of neighborhood homes in the past three years.  The auditors are making lower appraisals in many circumstances due to the recession and its impact on the real estate market.

Many people will have a good argument if they contest their auditor’s new assessment.  But the Swami reminds homeowners that a lower appraised value will also lower your taxes.  If you plan on selling your home in the next three years, lower taxes are a treasure. 

Your asking price does not have to match the appraiser’s value. What matters is what comparable homes are selling for at the time you put your house on the market.  Remember, an appraisal is only a valuation at a specific moment of time.  They are a snapshot of the day the appraisal took place.

If you put your house up for sale and get a contract, the buyer’s lender will have a new appraisal done.  They will ignore the county’s appraised value and look at the condition of your home and the most recent comps in your neighborhood.  Those factors will determine your home’s appraised value at that specific time. And timing is everything, says the Swami.    

You can look up recent sales in your neighborhood at the county auditor’s web page. Just bring up your home and click on Recent Area Sales. That will give you a good idea on how your house is trending in the neighborhood.  

“Lower taxes are a good thing,” says the Swami.  “Patience and knowledge are keys as the real estate market moves forward.”

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 For more information on central Ohio real estate contact the Real Estate Swami at jrmcgory@gmail.com.
 

Stagflation rears its ugly head!

By John McGory

Stagflation is back.  Stagnant wages and inflation due to increased food and oil prices are combining to create an economy where prices go up while wages remain static.  While 10 percent unemployment figures grab headlines, 90 percent of the workforce lives with the fact that their pay does not go as far as it did a year ago.

The Real Estate Swami says that until wages rise above the rate of inflation, the real estate market will languish. The Swami points to the 1970s and early 1980s as the last time our economy dealt with stagflation.

“Our standard of living continues to erode as the cost of goods and services increase, while wages stand still,” says the Swami.  “Oil price increases in the 1970s during an economic downturn caused a decade of turmoil.  It is unreasonable to think that real estate will flourish in this stagflation environment.”

The hourly earnings of workers in non-supervisory positions have risen by 2.3 percent from July 2010 to last July.  That is a full percentage point below the 20-year average in annual wage increases of 3.3 percent.

In the same time period, the consumer price index increased by 3.6 percent. This means Americans are losing ground in their standard of living. With sustained high unemployment, a growth spike in wages does not seem to be in the cards for the next several years.  The only hope for relief is a significant drop in oil prices, which could decrease consumer prices and stop the slide in the standard of living.

“It is a time of economic retrenchment for all.  While much can be learned from living with less, the huge real estate machine that creates many jobs will remain silent,” remarks the Swami.  “Wealth for the people must be created before sustained prosperity returns.”

The Swami points to the fact that 70 percent of the U.S. economy is derived from consumer spending. If consumers are losing ground to inflation and stagnant wages, fewer products will be consumed.

“Real estate is the biggest item anyone buys.  But we cannot buy if we do not have,” the Swami says.   
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Home Building: A Shaky Future?

By John McGory

With the demise of the home building industry, a fundamental change in how we house people is facing our country.  The Real Estate Swami says the economic meltdown may usher in a new era in how we build and pay for housing in the U.S.

Sales of newly built homes, which peaked at 1.3 million units in 2005, are running at an annual rate of just 298,000 units in 2011 and are on pace to post the lowest count since record keeping began in 1963.  

Home building starts in central Ohio’s seven-county region totaled 600 through July 2011.  In the late 1990s, it was not uncommon to see 600 permits per month in the City of Columbus. 

 This staggering drop in new housing is chasing builders, large and small, out of business.  The Swami says that home building as we know it today may never return

“Central Ohio’s impressive home building industry is but a shell of what it once was,” remarked the Swami.  “In what form it returns when housing is needed is a question not yet answered.”

The Swami says the real estate meltdown shows where home ownership and the new economy have diverged.

He predicts the speed of the new economy will challenge home ownership and 30- or 40-year mortgages.  These challenges include:

1.   Worker skills necessary today may be useless tomorrow.

2.   Middle class jobs are disappearing.

3.   Companies flourish for a short period of time, then wither away. 

4.   Governments struggle to pay their bills and maintain necessary services.

“These are signs of a troubled day-to-day economy,” remarks the Swami.  “How can a home owner sign a 30-year mortgage under such uncertain circumstances?  How can communities afford services for suburban-styled development with this short-term economic mentality?”

The Swami foresees changes such as hybrid ownership/leasing arrangements, larger multi-family housing projects and the halt to sprawling development in rural areas.

“Significant changes in society took place during the last Great Depression.  How we live amongst one another will be one of the major changes we face as this economic malaise slowly comes to an end,” says the Swami.

The Real Estate Swami is brought to you by Web Face, a Columbus communications and marketing company (www.web-face-solutions.com)